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Income taxes and endogenous fluctuations: a generalization

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  • Gokan Yoichi

    (1-1-1, Nojihigashi, Kusatsu, Shiga 525-8577, Japan)

Abstract

This paper offers an integrated framework of one- and two-sector optimal .growth models for the dynamic analysis of the joint effects of distorting taxes and production externalities. We investigate how capital and labor income tax rates influence local dynamics near a steady state depending on the sizes of externalities. Our results clarify how tax rates on factor income affect the range of the sizes of externalities that induce indeterminacy. We find that the possibility of indeterminacy is significantly higher for given values of externalities, the labor supply elasticity and the elasticity of intertemporal substitution in consumption if capital income tax rates are increased from zero to values similar to those in many countries.

Suggested Citation

  • Gokan Yoichi, 2013. "Income taxes and endogenous fluctuations: a generalization," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 17(4), pages 461-482, September.
    • Handle: RePEc:bpj:sndecm:v:17:y:2013:i:4:p:461-482:n:4
    DOI: 10.1515/snde-2012-0032
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    References listed on IDEAS

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    1. Rivas, Luis A., 2003. "Income taxes, spending composition and long-run growth," European Economic Review, Elsevier, vol. 47(3), pages 477-503, June.
    2. Basu, Susanto & Fernald, John G., 1995. "Are apparent productive spillovers a figment of specification error?," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 165-188, August.
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    Cited by:

    1. Juin‐Jen Chang & Jang‐Ting Guo & Jhy‐Yuan Shieh & Wei‐Neng Wang, 2015. "Sectoral Composition Of Government Spending And Macroeconomic (In)Stability," Economic Inquiry, Western Economic Association International, vol. 53(1), pages 23-33, January.
    2. Juin‐Jen Chang & Jang‐Ting Guo & Jhy‐Yuan Shieh & Wei‐Neng Wang, 2019. "Sectoral composition of government spending, distortionary income taxation, and macroeconomic (in)stability," International Journal of Economic Theory, The International Society for Economic Theory, vol. 15(1), pages 95-107, March.

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